How to gauge the value of an employee wellbeing scheme

Businesses have spent heavily on wellbeing programmes in recent years, but such investments are coming under scrutiny as the economy falters. Will they prove their worth to increasingly cost-conscious employers?

The seeds of employee wellbeing first sprouted in the mind of George Pullman. The US engineer and industrialist was the owner of the Pullman Company, which manufactured luxury railway coaches. In 1880, he built a housing estate for employees on the southern outskirts of Chicago, with the aim of creating a superior working-class community that would attract skilled employees and make them even more productive. His so-called company town – Pullman, Illinois – would go on to inspire the likes of Bournville and Port Sunlight in the UK. 

The 1,600ha site beside Lake Calumet offered comparatively luxurious dwellings, complete with gas and water supplies, access to full sanitary facilities and even private gardens. Extensive parkland provided ample shared recreation space. Home maintenance services and refuse collections were included in the rent.

Some businesses have more than 50 initiatives, but are people using these?

Residents were also given access to a wide range of sporting facilities through the Pullman Athletic Club. The idea was that the company would attract and retain a superior type of working man, who would keep strong and fit through his exertions on the sports field. The ultimate goal: to have a healthy, contented and highly productive workforce powering a thriving business.

Pullman’s investment was lauded nationwide, with the community receiving several awards as its population grew to 12,000. But his concern for employee wellbeing was eventually trumped by the need for profitability and the whole utopian vision collapsed in a spectacularly awful way. During an economic downturn in 1894, the firm slashed workers’ wages but refused to reduce their rents. Pullman’s impoverished residents went on strike in protest, which ended only after federal troops were sent in, ostensibly to protect strike-breakers and prevent acts of sabotage. Scores of workers were killed in the violence that ensued. 

Are you getting value for money?

Employee wellbeing remains a tricky subject for business leaders to this day. Millions of pounds have been spent on schemes to attract and retain talent and develop a happy, healthy workforce. A 2022 survey by Vitality found that 82% of UK office workers thought their employers had a duty to support their physical and mental health, while 45% said they would consider quitting their current firm for one that would give their wellbeing a high priority.

With budgets tightening as the economic outlook worsens, it’s understandable that employers want to know what, if any, returns their wellbeing investments are generating. But how can firms obtain an accurate measure of their value?

“Businesses should start by assessing their programmes and the health and wellbeing of their workforce,” says Vitality UK’s director of corporate business, Pippa Andrews. “Some businesses have more than 50 initiatives, but are people using these? And are they addressing employees’ specific needs? If not, they’re wasting money and they aren’t helping their people.”

To employers either reviewing their schemes or taking their first steps in wellbeing, Vitality recommends using surveys to establish a data-led approach. This will create a detailed benchmark of employee health and related risks that could cost the business. These insights can inform decision-makers when they’re choosing the interventions that should best meet people’s needs. Metrics can also be agreed upon to assess outcomes – for instance, the change in the number of sick days taken for stress-related reasons each year.

Before funding a whole suite of wellness offerings, businesses should first target a single problem to ensure that such interventions will be effective. Hintsa Performance, a firm that helps elite athletes and business leaders to optimise their physical and mental health, used this approach when it worked with a manufacturing company last year. 

A simple formula would be the sum of the output increases and cost reductions divided by the cost of the programme

After learning that 20% of workers at its client’s factory were experiencing lower-back pain, Hintsa implemented a four-week exercise plan. Using the Oswestry Disability Index to measure the participants’ lower-back capacities before and after that intervention, it found significant improvements across the board. With its success proved, the scheme could then be rolled out across the organisation, with achievable and realistic cost-related key performance indicators attached to it. 

“We have three categories for business-related KPIs: lowering cost (for instance, those of sickness absence and health insurance), improving output and reducing risk,” says Hintsa’s COO, Nora Rosendahl. “A simple formula to measure the return on investment in this type of intervention would be: the sum of the output increases and cost reductions divided by the cost of the programme.” 

How to quantify intangible sources of value 

But, while the ROI is straightforward enough to measure where the wellbeing scheme has clear and direct links to business outcomes, how can it be assessed for the less tangible, indirect improvements it leads to, which can’t be assigned a single metric? 

Last year, Rosendahl wrote a white paper that recommended using value on investment (VOI) as well as ROI. The former is a broader measure of all the benefits of health and wellness schemes. It goes beyond ROI by tracking aspects such as morale, satisfaction and retention, all of which can boost the bottom line indirectly. 

Qualitative surveys – the Employee Satisfaction Index, for instance – can be a useful source of data, because we tend to work more efficiently when we’re feeling upbeat. A six-month study of BT call-centre staff by researchers from the University of Oxford in 2019 concluded that the workers were 13% more productive when they were happy than when they weren’t. 

Cracking the retention challenge

A similar approach to VOI underpins the wellbeing strategy at Moneypenny, a company that manages phone calls and live chats for firms in the UK and US. 

“I’m not looking for a specific financial return on wellbeing,” stresses its group CEO, Joanna Swash. “I want to attract and retain the best employees locally. Our staff turnover is low because we look after people and create a family culture. If you want to scale up a business, you need your best employees to grow with you. They’ll do that only if they’re invested in an employer that looks after their physical and mental health.”

The US Society for Human Resource Management estimates that the average cost of replacing a departing worker roughly equates to paying their salary for another 30 weeks. Although Moneypenny isn’t preoccupied with ROI, its low employee churn rate, which can be attributed at least partly to its wellbeing efforts, saves the company significant sums and indicates that using VOI to gauge the return on wellbeing schemes is a worthwhile exercise. 

But there are some wellbeing initiatives that simply can’t be assessed using conventional yardsticks. In December 2022, Moneypenny created a festive market to provide employees with everything they needed for Christmas dinner. 

“This is about making the effort, so that people feel special and wanted,” Swash says. “Wellbeing is about gut feel, not spreadsheet management. Does what you’re doing feel good and make employees smile? Does it make them want to stay?”

The message for employers is clear: tailored wellbeing schemes that meet people’s specific needs lead to healthy, happy employees and, in turn, a healthy, profitable business. And that has to be worth the investment, right?